Singapore shows concerns about BNPL apps

Cause for concerns: Shoppers walking past a promotional sign for Atome when entering a store in Singapore. The growing popularity of BNPL services among young Singaporeans is unnerving regulators. — Bloomberg

SINGAPORE: Would that be by cash, card or a handful of equal payments over a few months?

Starrie Lee, 23, opted for the latter when she bought a computer monitor online in May. In just a few clicks, the analyst for a technology consultancy split her purchase over three installments using a Singapore-based “Buy Now, Pay Later, ” or BNPL, service known as Rely. She is scheduled to pay off her roughly S$500 (US$380 or RM1, 563.70) bill in July.

“As someone who does strict budgeting on my monthly expenses, using BNPL gives me more flexibility and reasonableness in managing my cash flow, ” Lee said. “It prevents me from overspending.”

Many officials in Singapore, though, aren’t convinced Gen Z consumers like Lee are spending wisely. The growing popularity of BNPL services among young Singaporeans is unnerving regulators and politicians who fear BNPL apps prey on 20-somethings who may be financially naive.

“Young adults without sufficient financial awareness can have access to credit lines before they have the necessary earning capacity, ” said Cheryl Chan, a Member of Parliament from the ruling People’s Action Party, in an email. “This is an unhealthy trend.”

Among those sounding the alarm is the Monetary Authority of Singapore (MAS), the city-state’s de-facto central bank, which has launched a media campaign warning the payment methods may lead to debt and consumer credit risk.

In one article in the Straits Times newspaper, the MAS encouraged people to avoid borrowing for shopping sprees. “You should always spend within your means and not see BNPL schemes as a way to buy items that are more expensive than you can afford, ” the report said. “Do not be a hostage to your spending habits.”

BNPL services, also known as point-of-sale loans, allow buyers to spread out the cost of a purchase over a few months without interest fees, making even big-ticket items seem within reach. Already popular in the West, the services are gaining ground in Singapore and other parts of South-East Asia.

Globally, the market for these payment services is expected to grow to about US$33.6bil (RM138.26bil) by 2027 from US$7.3bil (RM30.04bil) in 2019, according to consulting firm Coherent Market Insights.

Most Singapore users are between 20 and 35, according to local BNPL companies, indicating that younger people are moving away from the traditional mindset against debt that many South-East Asians hold. Retailers like Sephora and Zara accept the installment payments, with merchants paying BNPL companies a fee for each transaction.

“People want to have the latest fashion and look like they’re on trend, ” Anton Ruddenklau, partner and head of financial services at KPMG LLP in Singapore said. “That is a big driver for people purchasing goods and then deciding to smooth the payments over time.”

The Covid-19 pandemic has accelerated the rise of BNPL services in the city-state by forcing merchants and consumers online, allowing shoppers to search quickly for the best deals and easily opt to use the payment method. — Bloomberg

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